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A Beginner's Guide to Understanding R-Codes

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Finance

Financing your property development

In most instances, people looking to develop a property will need to obtain funding approval from a lending institution. It is always a good idea to ascertain your borrowing capacity early in the process and work out whether property development is right for your situation.

Financing your new project differs slightly from financing a single home; yes, the figures need to add up and the lender will be looking at the borrower’s financial history. However with property development, the lender will also want to see the feasibility of the project and ensure that the development team have allowed for contingencies. The risk for the bank is higher when funding a development and they will want to ensure that a professional, carefully planned approach to the project has been implemented.

Using a loan to value ratio (LVR) most lenders will fund up to 70-80% of the cost of the build, as opposed to what the project will be worth once completed. Also unlike single residential dwelling funding, most financiers will also lend the ongoing interest for the development. There is still a sizeable component of 20-30% that the borrower will need to fund themselves.

Lenders also take into account the location of the development and whether there is a history of development in the area, how the market is currently performing in the area, the size and quality of the dwellings - small dwellings of poor quality may not sell as well, and what security is offered to secure the loan.

The team at Vision One Projects have a wealth of experience in property development and can ensure that all documentation pertaining to the finance application is prepared in accordance with the lenders requirements, giving your project the best chance of getting off the ground. Our team can put you in touch with finance brokers who have a range of financial solutions.